1. A manager of a perfectly competitive firm observes that the marginal product of labor is 4 units per hour, the marginal product of capital is 10 units per machine, the wage is $10 per hour, the rental price of capital is $80 per machine, and the price of output is $5 per unit. To maximize profit, the manager should hire labor and rent capital. a. more, more b. more, less c. less, more less, less d. 2. An economy has the Cobb-Douglas production function Y = 10K1/4L3/4. If the economy's stock of capital doubles, the share of total income paid to the owners of capital will a. b. double. increase by 25%. increase by 75%. stay the same. c. d. 3. If domestic residents of France purchase 1.2 trillion euros of foreign assets and foreigners purchase 1.5 trillion euros of French assets, then Frances net capital outflow is a. b. -0.3 trillion euros, so it must have a trade deficit. -0.3 trillion euros, so it must have a trade surplus. 0.3 trillion euros, so it must have a trade deficit. 0.3 trillion euros, so it must have a trade surplus. c. d. 4. Other things the same, a country could move from having a trade surplus to having a trade deficit if either a. b. saving rose or domestic investment rose. saving rose or domestic investment fell. saving fell or domestic investment rose. saving fell or domestic investment fell. c. d. 2